Delivering a quality audit review within a tight deadline case study

Cline Mining shares how PwC gained a quick understanding of their company to review their financial statements

Summary:

Cline Mining approached PwC for a quote on the financial statement audit

With only one month to deliver it, PwC realized they needed a deep understanding of the company's coal mining operations and spending plans in infrastructure quickly

Our approach was to conduct a site visit, keep executives informed during regular update meetings and hold a pre-closing meeting to share information revealed throughout the audit process, get management's opinion and give suggestions

Cline Mining obtained an unqualified audit opinion on their financial statements, which was subsequently filed by the deadline

Cline Mining, a publicly-traded development stage company focused on the redevelopment of the New Elk coal mine in Colorado and the continued exploration of its Canadian properties, appointed PwC as its auditor for the year ended November 30, 2009.

The challenge

In 2009, Cline Mining approached PwC for a quote on the financial statement audit. As a growing company, they were looking to work with a full-service firm that could bring the right industry knowledge and experience to work with them through the different stages of growth. Having developed a long-standing professional relationship with Cline Mining vice president and CFO Ernest Cleave from a previous assignment, partner Paul Fitzsimon and senior manager Michael Murphy led PwC’s successful bid, replacing the incumbent firm.

The catch: PwC was appointed auditors in October and Cline Mining’s year-end was in November. Working collaboratively with Cline Mining to deliver a robust and efficient audit under the tight deadline became the top priority for the PwC team.

"We went through a particularly tough audit session where the PwC team had to get up-to-speed quickly and work with a number of different stakeholders. We know it was fast, but PwC managed to review everything and meet our tight deadlines. We were able to file the audited financial statements on time.”

Our approach

To ensure a high quality audit, PwC’s dedicated mining team acknowledged the need for a deep understanding of Cline Mining’s coal mining operations and spending plans in infrastructure. Conversations with the management and the review of the company’s publicly filed documents gave the team solid knowledge. Also, Paul and Michael quickly attended a site visit at the mine in Colorado during the audit in order to gain better insight into their operations.

“It was important for us to visit the mine directly to meet the people that work on the ground every day and get a feel for the various stages involved in redeveloping the mine. This was a great opportunity to get to know the project and the key people driving it forward,” said Murphy. “Our priority was to bring technical competence with a client service focused approach.”

As a growing company, it was essential to Cline Mining’s management that their auditor dedicated time to talk about audit and business issues over the course of the year.

“We wanted to work with a firm that always had the interest of our company in mind,” said Cline Mining’s CFO Cleave. “The ability of PwC to gain a quick understanding of our company and needs, including a timely site visit, demonstrated that they truly wanted to understand our business and the audit risks associated with the New Elk operation.”

The team made sure that Cline Mining executives were kept informed through regular status updates and that they felt comfortable contacting PwC with any questions as they went through their processes. Practical two-way information meetings were established to clarify complex areas and technical issues Cline Mining faced, like Asset Retirement Obligations (ARO) and continuing interest in mineral properties. These “workshop style” sessions enabled Cline Mining’s management to provide input on how they were reporting on these practices for consideration in the audit, and leveraged PwC’s technical expertise and industry knowledge. For example, professionals from PwC’s mining tax group informed management on aspects of US tax structuring they could consider in assessing the company’s tax disclosures.

A pre-closing meeting took place to discuss elements covered and revealed throughout the audit process and to obtain management’s opinion. As part of their review of the financial statements, the PwC team identified a number of improvements to be made to the financial statements, which were later implemented by Cline Mining. Management appreciated the focused approach adopted in discussing and agreeing audit adjustments and suggestions for enhanced financial statement disclosures.

The result

At the end of the audit, Cline Mining obtained an unqualified audit opinion on their financial statements, which was subsequently filed by the deadline. Adds Cleave: “We went through a particularly tough audit session where the PwC team had to get up-to-speed quickly and work with a number of different stakeholders. We know it was fast, but PwC managed to review everything and meet our tight deadlines. We were able to file the audited financial statements on time.”

PwC is now working alongside Cline Mining on their next annual audit.

PwC team

The team was made up one of PwC’s mining practice partners Paul Fitzsimon and senior manager Michael Murphy.